Industrial vacancy especially tight at the top

Put on your reading glasses, or click on "zoom in," and check out this little-bitty number: 1.7%.

It's the vacancy rate for Class A industrial property in Oklahoma City, the same as at the end of last year, according to NAI Sullivan Group's firstquarter industrial market report.

That's pretty remarkable, even if flat.

Flat's not bad when property is about full, especially after a flurry of activity — thank you, medical marijuana, rapid retail delivery, and general economic strength.

That tiny vacancy rate supported an average rental rate of $6.26 per square foot per year on a triple-net basis (meaning the tenant pays for building insurance, property taxes, maintenance and utilities). That's up nearly 10 percent from $5.70 at the end of 2018.

Class B and C rents also rose, on similarly flat vacancies, NAI Sullivan reported:

• Class B rent averaged $5.58 per square foot per year, up from $5.28 at the end of 2018.

• Class B vacancy rate was 4.9%, up fro 4.3% at the end of 2018.

• Class C rent averaged $5.35 per square foot per year, up from $5.15 at the end of 2018.

• Class C vacancy rate was 3.70%, the same as at the end of 2018.

The narrowing gap between Class B and Class C average rents makes me think demand is building for another splash of speculative industrial construction. Maybe.

A little splash, because Oklahoma

City is not prone to big splashes of spec industrial construction.

Maybe the 172,000-squarefoot multitenant bulk warehouse coming out of the ground at 3700 S Purdue Ave., offered by CBRE at $6.25 per square foot — maybe that, and a few other smaller spaces coming along, are enough for now for this cautious industrial market.

• Overall rent averaged $5.59 per square foot per year, up from $5.39 at the end of 2018.

• Overall vacancy rate was 4.1%, up from 3.8% art the end of 2018.

As usual, Bob Sullivan, CEO of NAI Sullivan Group, put the stats in the context of the local economy in this report, as well as quarterly reports on retail, office, and multifamily property, (slightly dated because a lot can happen between March 31 and May 25) available at naisullivangroup.com:

"As oil and gas prices continue to climb despite the number of drilling rigs being down, the Oklahoma City market continues to revive," he wrote. "The commercial real estate market is active and strong, especially in the CBD (Central Business District) and midtown area. The Central Oklahoma Transportation and Parking Authority has approved the 1,100space garage which is key to the new convention center and Omni Hotel.

"The Oklahoma City Council has approved a loan of $26 million for renovation and construction at First National Center. The Oklahoma City downtown Boulevard is well under construction and is set to be completed later this year. The Amazon distribution center is expected to open by the end of 2019, and the first Costco is expected to open during the summer 2019 (it's open already). The Scissortail Park and Omni Hotel are on their way."

Bottom line: "There is great activity in the Oklahoma City market. The low living cost and business cost continue to attract investors from across the country."